Ha ha Europe

Oh.

...the imbalances created by [housing] bubbles are easier to recognize. These show up in low domestic savings rates and high current account deficits. The countries that stand out on this list are the United States and Spain, with current account deficits of more than 6.0 percent of GDP, and New Zealand with a deficit of more than 9.0 percent of GDP. These deficits are unsustainable, as virtually all economists agree. The adjustments from large current account deficits to manageable deficits are almost always painful. Typically the adjustment is associated with rising inflation, and then high unemployment as central banks raise interest rates to stop inflation. (Think of increasing annual tax revenue and/or cutting government spending in the United States by $600 billion – the order of pain is comparable.)

The countries on which the Europe critics focus their wrath (France, Italy, and Germany) have small current account deficits or surpluses, meaning they don’t face the painful adjustments that loom for the Spain, the United States, and New Zealand. This means that when the adjustments actually occur, we may have a different assessment of which countries’ economies look good and which ones look bad. Until then, we will have to listen to many more tirades from the Europe critics, whose voices go virtually unanswered in the media.